Pinnacle Oil and Gas Ltd has emphasised the importance of adopting transparent, market-based pricing in the downstream oil sector even as it urged Dangote Petroleum Refinery to align with the competitive market processes to maintain industry stability and prevent potential supply disruptions.

The Chief Executive Officer of Pinnacle, Robert Dickerman, stated this yesterday while briefing the media on the efforts it has made to strengthen market competition and efficiency.

Dickerman that importation does not equate to throwing the market open to substandard or off-spec products, insisting that there is no reason to believe that products refined in other countries would be of lower quality than those refined in Nigeria.

He noted that all imported products go through thorough quality control enforced and monitored by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

“The Dangote Refinery would be well advised to utilise this system and help keep prices at market levels so that the entire industry can avoid supply disruptions and price shocks. There is no need or desire to re-create the distribution network where every truck must load at one point for the entire country,” he said.

Dickerman emphasised that the optimal solution to Nigeria’s energy security and pricing is a market-based approach that encourages all sources of supply even as he pledged that the company would continue to work with Dangote to enhance efficiency.

The suppliers, he said, must adhere to the strict specifications of the market, with products being handled safely to ensure quality and reliability. The consumers should be indifferent to the source of supply, as long as the product is of good quality and the price is the lowest attainable, he noted.

The petroleum expert emphasized that the solution to the current challenge requires fostering fair competition in the market to ensure the best outcomes for both quality and affordability.

“At a market price, there is an unlimited availability of supply. Globally, to be honest with you, there is a bit of a surplus in refining capacity and many European refineries lately have been closing their refineries. Even a couple of refineries in the United States have recently announced that they are closing because there is overcapacity. There is no shortage of gasoline, diesel, jet fuel or any particular petroleum products. If Nigeria adopts a market supply system, that will solve the energy problem.

“Market pricing implies that there are many buyers and many sellers, demand is always going to seek the lowest price, and supply is always going to seek the highest price.

Everyone works to their incentives, acting in their own best interests. That is the presumption in a marketplace. Where supply and demand meet are the market price for that particular product; then and location which doesn’t mean that the market price in Amsterdam is the same as the market price in Lagos,” he said.

The clarification was made against the claims by the management of Dangote that deregulation should not be a licence for the importation and distribution of off-spec products or the subversion of national interests.

Dangote Refinery had previously stated that it rejected a request from Pinnacle to connect a pipeline to its facility, which would have allowed the blending of Dangote’s high-quality refined products with Pinnacle’s imported products for sale in Nigeria.

Dickerman clarified that the objective was to enhance distribution efficiency and that Dangote Refinery had fully agreed to the proposal and subsequently signed a 13-year interconnection agreement to facilitate the distribution of its refined products through Pinnacle’s infrastructure.

“In our effort to further enhance distribution efficiency, we proposed and invested in pipelines to distribute petroleum products from the Dangote Refinery, as pipeline transfer is far less costly than distribution by ship or trucking across the country. When we proposed this project to Dangote, they wholeheartedly agreed and signed a 13-year interconnection agreement with us. In addition, Dangote facilitated our process of achieving regulatory approval by writing two letters of no objection to the regulator to enable our project to proceed,” he explained.

Dickerman stressed that Pinnacle built a revolutionary terminal in the Lekki Free Zone (FZE) at great expense to enhance efficiency in the distribution of petroleum products throughout Nigeria. Before the Pinnacle terminal, all imported cargo had to be transferred to smaller vessels due to the shallow draft restrictions across Nigerian ports.

“We wish the Dangote Refinery well and expect that with all their options for sales and distribution, they will find it simple to compete at market pricing and make a healthy return for their investors. This will encourage further investment in refining, storage and distribution to make Nigeria an efficient global trading hub, and an example for other markets around the world,” he said.